ECON EXAM 2 (Ch 4,5,6,12)

The elasticity of demand at point C is: (8,2)

.5 : p/q * 1/slope: 2/8* 1/.5=.5

When Cathy goes from hiring 10 to 11 workers in her bakery, her total output increases from 100 to 120 loaves of bread per day. If Cathy's production process exhibits diminishing marginal returns, then when she hires 12 workers, we know her total output will be less than ____ loaves of bread per day

140 Loaves: 12th worker adds 20, total output < 140

Consider the table on the right, which shows the total cost of producing wedding cakes at Crumby Bakery. If the market price for a wedding cake is $250, and crumby bakery is a price-taker then how many wedding cakes should the bakery make each day

3: since the marginal benefit of selling an additional cake is $250, CB should expand output until it reaches 3 wedding cakes per day. If it produces a 4th, the resulting MC ($300) would exceed the MB

The picture on the right shows the cost curves for the West End Bakery. in this picture the bakery's profits equal ____ dollars per day:

50

Given the figure to the right, the price elasticity of supply for this product is:

Equal to 1 at every price, the elasticity of supply will always be equal to 1 at any point along a straight-line supply curve that passes through the origin

If the price elasticity of supply for cotton is 1, then if the price of cotton goes down by 5% the quantity of cotton supplied will:

Go down by 5 %, since the price falls, quantity supplied will go down

Price elasticity of demand is:

The % change in quantity demanded that results from a 1% change in price

suppose a recent announcement by the US dept. of Agriculture leads Mr. Zuckerman, who grows sugar cane to believe that the price of sugar cane will increase sharply next year. This should lead Mr. Z's current supply to:

decrease, expectations of future price increases lead current supply to decrease bc suppliers prefer to sell their product when prices are high

a workers human capital includes factors such as the workers:

education, intelligence, creativity, motivation

supply curves are upward sloping in part bc as prices rise:

firms with a higher opp. cost of producing the product will be more willing to start supplying the product and individual suppliers already in the market will be willing to turn more costly production techniques to supply more of the product

if the price elasticity of demand for beer is 1.19, and the price of beer goes up by 1 % then the quantity of beer demanded will:

go down by 1.19, Qd goes down since the price goes up

if the price elasticity of demand for electricity is 1.20, then if the price of electricity goes up by 10 % , the quantity of electricity demanded will:

go down by 12%

if the price elasticity of demand for milk is .4, the if the price of milk goes up by 20% the Q of milk demanded will:

go down by 8%

which of the following capture the conditions under which firms will shutdown:

if the firms revenue is less than the firms variable cost at all levels of output, and if price is less than average variable cost even when the firm produces at the level of output that minimizes average variable cost

labor unions are thought to:

increase the wages of unionized workers but decrease overall economic efficiency

Consider the figure on the right, as you move from point C to B to A, price elasticity of demand:

increases, the elasticity of demand increase as you upward along a straight-line demand curve

In the figure to the right, along the portion of the demand curve labeled B, demand is:

inelastic with respect to price

if a firm is profitable then at its profit maximizing level of output:

price is greater than the average total cost (P>ATC)

As prices ______ individual suppliers already in the market will be willing to turn to more costly production techniques to supply more of the product

rise

as prices _____ firms with a higher OPP. cost of producing a product will be willing to start supplying the product

rise

supply will increase as the number of :

sellers in the market increases

for a firm that produces jeans, which of the following is likely to be a factor of production:

sewing machines, denim, workers

winner-take-all markets are likely to occur in situations in which:

technology allows the most talented individuals to serve broad markets

The picture on the right shows the cost curves for the west-end bakery, the light blue shaded area represents (area is under price line)

the bakery's profit of $50 per day

in the short run a profit maximizing firm will not produce anything if:

the firms revenue is less than its variable cost at all levels of production

If the price elasticity of demand for paper is -.90, then if the price of paper goes down by 10%, the Q of paper demanded will:

Go up by 9%,

If the demand for economy-class airline tickets is elastic with respect to price, then if the price of economy-class airline tickets decreases then total expenditure will:

Increase: if the demand is elastic with respect to price, total expenditure will increase in response to a price decrease

Price X Quantity=

Total Revenue and Expenditure

elasticity of supply along any straight-line supply curve that passes through the origin is:

always equal to one

a fixed factor of production is:

an input whose quantity cannot be changed in the short run

The marginal cost curve passes through the minimum of the :

average total cost curve and the average variable cost curve

if marginal cost equals average total cost then:

average total cost is at its minimum

If the price elasticity of demand for coffee is .25 and the price of coffee goes down by 1 percent, then the quantity of coffee demanded will:

go up by .25 % , Qd goes up since price goes down

If the price elasticity of supply for dishwasher is .2, then if the price of dishwasher goes up by 8%, the quantity of dishwasher supplied will:

go up by 1.6 %, the Q of dishwasher supplied will go up .2 X 8=1.6